Nicholas Pothier, manager of the HSBC Open Global Return fund, insists the best way to deliver consistent returns is to be continually invested in all the major asset classes – even if they are going through tough periods.
"You only capture outperformance over the long term," he explains. "It is impossible to predict with certainty when an asset class will underperform cash, so you should never completely charge out of one and go into another."
His £130 million multi-asset, multi-manager fund, which was launched just over three years ago, maintained this stance throughout the financial crisis, even though its exposure to high yield and commodities was significantly reduced.
"We started taking risk off the table from early 2007, and by the second half of 2008 were 25% invested in cash, as it was clear by then that most asset classes would be affected," Pothier recalls.
The fund is now fully invested again.
"Our approach is to have a steady exposure to all asset classes and to select good managers within them," he explains. "They behave differently from one another, so if you mix them you get a natural smoothing of returns."
The overall aim of the fund, which has an A rating from Standard & Poor's, is to provide a return substantially above cash over the longer term through a diversified mix of investment funds and asset classes.
"It's designed for cautious people, with investment horizons of at least five years, who believe the world will continue to be a fairly uncertain place," Pothier says.
The fact it contains over 30 funds reflects its inbuilt diversification. As well as having exposure to the main asset classes of equities, bonds and property, its other holdings include specialist environmental and emerging markets funds.
The fund is currently overweight in investment grade corporate bonds, where the risk/return trade-off is seen as slightly better; broadly neutral on equities; and slightly underweight in property.
Once the portfolio is established, Pothier looks for managers who are "unconstrained, with a capital-preservation mindset". He cites Crispin Odey, manager of the CF Odey Opus fund, as a prime example: "He is prepared to go quite heavily into cash and protect his fund if necessary."
Any significant alteration in a fund's management team will prompt Pothier to undertake an automatic review, but changes in the fund's focus often simply reflect the fact that a better idea has come along, which he believes has a greater chance of success.
Looking ahead, Pothier still sees a fair amount of uncertainty in the path both the financial sector, and the global economy itself, will take over the next few years.
"As no one can foresee the outcome, we are fully invested, which is a logical place to be for a multi-asset fund – it means we can enjoy the natural benefits of diversification," he says.
|FUND FACTS: HSBC Global Asset Management|
|Address: 1st floor, 78 St James's Street, London, SW1A 1EJ |
Tel: 020 7991 8888
|Name ||HSBC Open Global Return fund|
|Launch date||November 2006|
|Fund size||£130 million|
|Sector||IMA Cautious Managed|
|Minimum monthly investment||£50|
Fund focus: HSBC Open Global Return Fund
Nicholas Pothier joined the multi-manager division of HSBC Global Asset Management in 2006 and is the lead manager of both the HSBC Open Global Return and the HSBC Open Global Distribution funds.
Prior to joining HSBC Global Asset Management, Pothier was a fund manager at AXA Multi-manager.
He has also worked for AXA Sun Life Discretionary Management Service as a fund manager assistant, and later as an analyst.
Pothier has more than 12 years' experience in the investment industry, starting his career with Liberty Life in South Africa as a broker consultant.
In addition, he holds an Open University diploma in Economics and an Open University BSc, as well as being a CFA Level 3 candidate.